What the US’ crackdown on crypto means for Singapore and the rest of Asia

Once a controversial subject, the need to regulate crypto is no longer a topic of debate. As it turns out, the ‘wild west’ of finance – romantic as it sounds – isn’t a place where people want to keep their money. The latest crypto winter has propelled a shift in mindset, and the search for innovation has now turned into a search for trust. 

After all, ideas of financial inclusion, tokenisation, and ungodly interest don’t mean much when the company offering them could vanish overnight. Since the LUNA / USDT crash and the subsequent domino of falling crypto firms, regulators have been called upon for their oversight. Investors are looking for a stamp of approval before handing over their money, and sponsoring a large stadium or sports event is no longer enough. 

Globally, a number of policymakers have answered this call — in fact, some of them started work before the phone even rang.

Crypto regimes around the world

Starting with Singapore, the Monetary Authority of Singapore (MAS) has addressed payment services involving crypto under the Payment Services Act.

Service providers including Revolut and Coinhako are licensed in the city-state, allowing investors easy access to a wide range of cryptocurrencies. The MAS has discouraged retail investments in this asset class – due to the high volatility and lack of understanding – however, no measures have been taken against it. 

Dubai has emerged as a promising crypto hub as well, following the set-up of the Virtual Assets Regulatory Authority (VARA). It’s the first jurisdiction to set up an independent body solely for the regulation of virtual assets.

Binance GM Alex Chehade praised this move stating that it reduces the complexity which arises when crypto is placed under the purview of existing regulatory bodies. Also in the UAE, Abu Dhabi has taken on a progressive outlook regulating crypto assets and associated businesses. 

The European Union took a big leap forward this May by adopting a legal framework on markets in crypto assets (MiCA). With rules covering utility tokens, stablecoins, and asset referenced tokens, MiCA aims to protect investors, while still allowing innovation in blockchain and crypto. Coinbase and Binance both commented in support, displaying a willingness to comply and grow in the region. 

Finally, Hong Kong has thrown its name into the hat more recently in a bid to become a global crypto hub as well. Earlier in May, its Securities and Futures Commission (SFC) announced that it would allow the retail trading of cryptocurrencies with a large market cap and high liquidity. This includes blue-chip coins such as Bitcoin and Ethereum. 

Where is the US headed?

Although it’s a key region for crypto mining and investment, the US hasn’t looked upon crypto companies too kindly in recent times.

Market regulators such as the Securities and Exchange Commission (SEC) have strengthened their efforts since 2022, but they haven’t yet offered the clarity that crypto companies are looking for. 

Most notably, the SEC has been embroiled in a lawsuit with crypto firm Ripple Labs, the outcome of which could lay down the future of crypto in the US. The SEC argues that Ripple’s XRP crypto token constitutes an unregistered security offering and thus breaches existing securities laws. If the SEC were to win, it could open the floodgates for similar action against a host of other companies which have issued their own crypto tokens. 

This stance was further supported by a leaked memo said to have circulated among members of the Democratic House’s financial services committee. As per the memo, lawmakers have been told to stick to the view that most cryptocurrencies constitute securities and are non-compliant with existing laws. 

Apart from this, reports have also emerged of US regulators pressuring banks to cut ties with crypto firms. Without a place to store fiat currency, crypto exchanges would no longer be able to offer their services in the country. This appears to be a response to the FTX collapse and a way to protect consumers from bad actors in the crypto space. 

In April, the CEO of Coinbase – the largest crypto exchange in the US – indicated that the company could leave the country in the absence of regulatory clarity.

How will this impact crypto in Singapore?

As US crypto companies prepare their emergency exit plans, global crypto hubs see the opportunity to attract new talent and investment. Two years ago, Singapore may have been a clear-cut first pick, but the competition has grown a lot stronger today. 

Countries have become more nuanced with their crypto ambitions and offer different value propositions to companies on the move. 

Under the MAS’ regime, utility is the top priority. Blockchain and crypto innovation is looked upon favourably only when it adds value to the real world.

One such example is the application of tokenisation and cross-border remittance, areas in which MAS actively participates. These initiatives aim to address current challenges by leveraging novel technologies. Companies engaged in such services can expect a well-defined trajectory for expansion while operating within Singapore.

On the other hand, retail exchanges and crypto trading firms might not find the country quite as hospitable. For over a year, advertising such services to the general public has been banned. Given the prevailing sentiment, new measures curbing retail trading wouldn’t come as a surprise either. 

Beyond this – judging by the number of successful applicants – the crypto licensing requirements in Singapore are stricter than those offered by jurisdictions in the Middle East. Successful applicants are also obliged to follow the prescribed rules even while operating abroad. 

Over the years, Singapore has made its vision for the future of crypto abundantly clear – a vision which may soon be pushed forward by companies previously based in the US. 

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